“When trouble is sensed well in advance it can be easily remedied: if you wait for it to show itself any medicine will to late because the disease will have become incurable" - Machivelli
Entrepreneurs and business managers are often so preoccupied with immediate issues that they lose sight of where they should be taking their enterprise. That is why a strategic plan is such a vital necessity. A strategic plan should not be confused with a business plan. The former needs to be a relatively short document, whereas a business plan is usually more substantial and with far more detail. A strategic plan nevertheless provides the foundation and framework for a business plan.
We identified three distinct phases in the development of an effective strategy as follows,
In this article we are going to focus on the “analysis” phase. Developing a worthwhile and meaningful strategy depends very much on how well you are able to analyze your present position. This should include an evaluation of the opportunities and challenges in the external environment and an assessment of internal strengths and weaknesses.
Depending on what kind of business you are in, there may be many factors that could influence your business strategy. In this rapidly changing world, you must be constantly on the look out for any developments that might affect your business. This will include any significant economic trends, new and changing technologies, legal and political issues and any other external factor that might affect your bottom line. Above everything else, you need to understand your customers. What are their present needs and what kind of changes are they considering? Never lose sight of the fact that the driving force behind any plan is to know what each of your customers want from you as a supplier. Make sure you understand why your customers buy from you and design your strategy to serve them better. Analyze your competitors’ capabilities and look for ways in which you can do better. Be on the lookout for any potential threats and do whatever is necessary to head them off. This kind of analysis has to be a continuous process. Understanding your competitors and meeting their expectations will only succeed if your performance exceeds that of your competition.
It is surprising how many organizations find it difficult to identify the current status of their business in terms of objectives, and strategies, in the case of an existing business, or where they want to take a new venture. Yet, correctly defined this kind if assessment can form the basis for identifying existing or perceived strengths, weaknesses, opportunities and threats. This process needs to include an assessment of the organization’s processes, its technical capabilities where appropriate, its information systems and of course its team skills. Although it is usually advisable to plan within an organization’s capabilities, rather than allow any weaknesses to seriously limit the strategy, it is preferable to identify those areas where improvements are needed and to ensure that the plan takes into consideration whatever is needed to rectify this situation.
A successful analysis of the external and internal factors should produce a wealth of information and it is necessary to select the most valuable elements, or those that will have the greatest effect on the strategy. The most effective way to do this is to develop a SWOT analysis, where SWOT is an acronym for strengths weaknesses opportunities and threats. A SWOT analysis is a structured exercise that helps to clarify the views of the team and act as a powerful driver of the plan and provide a way of measuring progress.
Typically a SWOT analysis might look something like this,
Strengths: What is the organization good at? Is there a recent success story that can be built on?
Weaknesses: What resources or capabilities are needed to improve the competitive position?
Opportunities: What needs to be done to reduce costs and improve sales? Where are the new markets?
Threats: How might the products and services may lose out to the competition? Which markets are declining?
Make sure that the strengths that have been identified are truly of benefit to the customer. From the list of weaknesses, it should be possible to identify the key areas where improvements in performance and service can be achieved and which now become potential opportunities.
Concentrate on those threats in the analysis which could result in the most damage. A carefully thought our SWOT analysis is a valuable tool in determining the underlying assumptions of the strategic plan. Ideally it needs to be reviewed every three months and amended to reflect any changes that have occurred.
A strategy’s strength is not in its initial moves, but rather how it anticipates the reactionary counter moves of the competitors and changes in customer demands over time. A strategy’s strength is found in how it deals with the dynamics of changes caused by other technologies, governmental regulations and influences from other expert sources. In the end it is wise to remember, that it is not how good the product or service is, but how strong its perceived value is to the customer, relative to the competitors’ offerings. Strategy should put barriers in the way of competitors once a competitive advantage is achieved. Good Strategies should sustain and renew that advantage at every possible opportunity.
Strategy not only gains the advantage, it must sustain it and control its erosion. To do this your strategy must demonstrate:
1. Superior customer value, this must be expressed in benefit statements that exhibit one of the three “E’s” of product positioning. Is the product Excellent, does it have or can it develop a strong reputation for quality and service excellence? Is it Efficient, does it improve the way things are done? Or is it Economical? Make no mistake this is the lowest price. This is also the lowest form of competitive advantage. The first step in any product strategic plan is to decide on which of the three “Es”, to stake your claim. The best way to determine this is by market research very early in the product development cycle.
2. Endurability With rapid technological change and shifts in customer buying preferences, can your product gain a strategic advantage? Ask yourself: “Will my organization be able to maintain this advantage long enough to achieve financial returns that will meet our expected return on investment?”
3. Covert Advantage Can the reasons you are able to deliver points 1 and 2, be kept from the competition? Are your sources of advantage ambiguous?
4. Boundancy - This may be new term that you have not heard before. It means: How do I bind the market to maintain my advantage even when my competitors know and understand the scope of my advantage? How is a competitor denied access to a resource that you have access to? Can the competitor be restricted from a technology because you have protected it or kept it as a trade secret? Are there applications that will keep improving your market advantage and keep your competitors struggling to catch up?
5. Retaliation “Don’t mess with me because if you do I will…” Remember the threat ofretaliation must be public. You must be able to deliver when needed. Before exposing this card, be sure you have the capability to act, and act quickly and decisively. Without a well-defined strategy, you cannot paint the pictures of your future that will convince your stakeholders that the endeavour and cost of gaining the advantage are worthwhile.
1. “Building Successful Ventures,” Ross Blaine, awaiting publication.
2. “Strategic Thinking”, Andy Bruce and Ken Langdon, published by Dorling.
3. “White paper – Developing a Strategic Plan”, www.planware.org .
4. “The CEO Refresher”, Helene Mazur.
5. Strategic Thinking and Planning”, Center for Organizational Effectiveness, UC Berkeley.